Ingeniador LLC v. Kellyco, Inc. et al
Filing
49
MEMORANDUM AND OPINION denying 33 Motion to Dismiss for Failure to State a Claim; noting 48 Motion In Compliance; granting 36 Motion for Leave to File Document. Signed by US Magistrate Judge Silvia Carreno-Coll on 10/27/2014.(NBB)
IN THE UNITED STATES COURT
FOR THE DISTRICT OF PUERTO RICO
INGENIADOR, LLC,
Plaintiff,
v.
CIV. NO.: 13-1655(SCC)
THE LORD’S CO. OF
ORLANDO, INC.,
Defendant.
MEMORANDUM AND ORDER
Before the Court is Defendant The Lord’s Company of
Orlando’s motion to dismiss for lack of personal jurisdiction
and for failure to state a claim. Docket No. 33. I now deny that
motion.
I. Personal Jurisdiction
In another patent case brought by the same plaintiff, I
recently had occasion to consider much the same jurisdictional
question as is presented here. See Ingeniador, LLC v. Jeffers, Inc.,
Civ. No. 13-1654(SCC), 2014 WL 2918586 (D.P.R. June 26, 2014).
INGENIADOR v. THE LORD’S CO.
Page 2
Essentially, the question before the Court is whether The
Lord’s Co. has sufficient contacts with Puerto Rico for this
Court to exercise specific personal jurisdiction. To help assess
that question, I recently ordered The Lord’s Co. to submit an
affidavit regarding its sales here, Docket No. 46, which it has
done, Docket No. 48-1.
Ingeniador holds U.S. Patent No. 7,895,127 (the “‘127
patent”), which teaches a rating-based method of sorting and
displaying reviews, including on websites. The Lord’s Co.
maintains a website via which customers can purchase metal
detectors and other products; according to Ingeniador, this
website displays customer reviews in a way that infringes the
‘127 patent. According to The Lord’s Co., between October 15,
2011, and September 15, 2014, fifteen sales have been made by
customers residing in or having their products shipped to
Puerto Rico, generating a total revenue of $13,331.04. Docket
No. 48-1, at 1–2. In that same period, The Lord’s Co.’s metal
detector business, Kellyco, has generated $72.5 million in
revenue over some 180,000 sales. This amounts to a minuscule
percentage of Kellyco’s total sales and revenue: 0.018% of
revenue and 0.008% of sales.
The fairly minimal nature of these sales notwithstanding, I
INGENIADOR v. THE LORD’S CO.
Page 3
think that specific personal jurisdiction exists here. The basic
question I must ask in performing this analysis is: Has The
Lord’s Co. “purposefully avail[ed] itself of the privileges of
conducting activities within” Puerto Rico? Grober v. Mako
Prods., Inc., 686 F.3d 1335, 1347 (Fed. Cir. 2012). The answer is
yes. First, The Lord’s Co. maintains a highly interactive, salesoriented website visible in Puerto Rico. The website, moreover,
makes special provisions regarding procedures for shipping to
Puerto Rico, indicating that it has specifically targeted this
jurisdiction. Cf. Illinois v. Hemi Grp. LLC, 622 F.3d 754, 757–58
(holding that the defendant’s website’s exclusion of sales to a
single state implied that it had “expressly elected” to do
business with the other forty-nine, including the forum state);
Jeffers, 2014 WL 2918586, at *3 (similar); EON Corp. IP Holdings
v. AT&T Mobility, LLC, 879 F. Supp. 2d 194, 206 (holding that
a website specifically targeted Puerto Rico where it referenced
special “process[es] specific to Puerto Rico”). Finally,
sales—even if not a great number of them—have been made
via the allegedly-infringing website and fulfilled to Puerto
Rico. By fulfilling these orders, The Lord’s Co. has “reach[ed]
out to residents of” Puerto Rico, “creat[ing] the sufficient
minimum contacts with [Puerto Rico] that justify exercising
INGENIADOR v. THE LORD’S CO.
Page 4
personal jurisdiction over” it here. Hemi Grp., 622 F.3d at 758.
And finally, although I have previously suggested that it
might not be possible to predicate specific personal jurisdiction
on de minimis sales,1 upon further reflection I believe that the
precedent is to the contrary. Trintec suggests that “allegations
of potential, but as-yet-unquantified sales to forum residents
via a defendant’s website are [in]sufficient to support an
exercise of personal jurisdiction.” Original Creations, 836 F.
Supp. 2d at 715 (citing Trintec Indus., Inc. v. Pedre Promotional
Prods., Inc., 395 F.3d 1275 (Fed. Cir. 2005)). Here, though, the
sales are real, not potential. And under such circumstances,
cases like Hemi Group suggest that even a fairly small number
of sales to a small number of purchasers may create specific
personal jurisdiction. See Hemi Grp., 622 F.3d at 756 (finding
specific personal jurisdiction on the basis of internet sales of
300 packs of cigarettes to a single buyer). Here, there are more
buyers than there were in Hemi Group, if fewer items were sold;
1.
See Docket No. 46, at 2–3 (explaining that some cases had “suggest[ed]
that a very small number of website-originated sales into a forum state
will not satisfy the Federal Circuit’s personal jurisdiction test” (citing
Original Creations, Inc. v. Ready Am., Inc., 836 F. Supp. 2d 711, 715–17
(N.D. Ill. 2011)); see also Ingeniador, LLC v. Jeffers, Inc., 2014 WL 2918586,
at *2 n.5 (D.P.R. June 26, 2014) (discussing Original Creations).
INGENIADOR v. THE LORD’S CO.
Page 5
moreover, the revenue at issue here is likely greater than that
in Hemi Group. As such, Hemi Group suggests that sufficient
contacts may exist for an exercise of specific personal jurisdiction. But see Original Creations, 836 F. Supp. 2d at 716 (finding no
personal jurisdiction where there was a single documented
sale, and where the website did not specifically target forum
residents). Finding Hemi Group’s reasoning persuasive, I follow
it, find that The Lord’s Co. purposefully availed itself of this
forum, and I turn to the remaining prongs of the specific
personal jurisdiction analysis.
The first of these asks whether Ingeniador’s claim arises out
of or is related to The Lord’s Co.’s activities directed at Puerto
Rico. See Avocent Huntsville Corp. v. Aten Int’l Co., 552 F.3d 1324,
1330 (Fed. Cir. 2008). As noted above, The Lord’s Co. directs its
Kellyco website to Puerto Rico for the purposes of making
internet sales. The products it sells are displayed on that
website, accompanied by the allegedly-infringing customer
rating system. The purpose of this system is plainly to help The
Lord’s Co. sell products. As such, I find that The Lord’s Co. “is
using the allegedly-infringing service as part of its forumdirected activities, and the test is easily satisfied.” Jeffers, 2014
WL 2918586, at *3 (citing Avocent, 552 F.3d at 1332). As to The
INGENIADOR v. THE LORD’S CO.
Page 6
Lord’s Co.’s argument that jurisdiction is improper because the
servers hosting the website are not in Puerto Rico, I note that
a number of courts have held that a defendant’s use of an
allegedly-infringing website to conduct business in the forum
state creates personal jurisdiction as to claims arising from the
website. See, e.g., Audi AG & Volkswagen of Am., Inc. v. D’Amato,
341 F. Supp. 2d 734, 748 (E.D. Mich. 2004) (holding that
personal jurisdiction was proper in a trademark case where the
defendant had “solicit[ed] sales through an infringing website”
directed at the forum state); Ameripay, LLC v. Ameripay Payroll,
Ltd., 334 F. Supp. 2d 629, 633 (D.N.J. 2004) (“When a defendant
sells its services to subscribers in the forum, or assigns forum
residents passwords knowing that the contacts will result in
business relationships, courts have asserted jurisdiction based
on an infringing website.” (internal citations omtited)); see also
Balthasar Online, Inc. v. Network Solutions, LLC, 654 F. Supp. 2d
546, 552 (E.D. Tex. 2009); Ticketreserve, Inc. v. viagogo, Inc., 656
F. Supp. 2d 775, 782 (N.D. Ill. 2009); Variant, Inc. v. Flexsol
Packaging Corp., Civ. No. 08-478, 2009 WL 3082581, at *2 (E.D.
Tex. Sept. 21, 2009); M. Shanken Commc’ns, Inc. v. Cigar500.com,
Civ. No. 07-7371, 2008 WL 2696168, at *4–6 (S.D.N.Y. July 7,
2008). But see, e.g., A.W.L.I. Grp., Inc. v. Amber Freight Ship.
INGENIADOR v. THE LORD’S CO.
Page 7
Lines, 828 F. Supp. 2d 557, 571 (E.D.N.Y. 2011) (“Courts have
held that, when websites display infringing marks, the tort is
committed where the website is created and/or maintained.”).2
Last, I consider whether “subjecting [The Lord’s Co.] to
jurisdiction in this forum would be reasonable and fair.” Id. at
*4. Courts consider a number of factors in making this determination. See, e.g., Deprenyl Animal Health, Inc. v. Univ. of Toronto
Innovations Found., 297 F.3d 1343, 1355 (Fed. Cir. 2003). But
ultimately, if a defendant that has “purposefully directed [its]
activities at forum residents seeks to defeat jurisdiction, [it]
must present a compelling case that the presence of some other
considerations would render jurisdiction unreasonable.” Burger
King Corp. v. Rudzewicz, 471 U.S. 462, 477 (1985). The Lord’s
Co.’s argument as to this matter focuses principally on the fact
that its employees and documents are located wholly outside
2.
At least one court has noted the conflict between these two lines of
cases, hypothesizing that it might be explained by the fact that in cases
like D’Amato, the alleged infringing website is used “in connection with
commercial internet activity in” the forum state, while in cases like
A.W.L.I. Group, there is no such commercial activity. Yash Raj Films
(USA) Inc. v. Dishant.com, LLC, Civ. No. 08-2715, 2009 WL 4891764, at
*7–8 (E.D.N.Y. Dec. 15, 2009).
INGENIADOR v. THE LORD’S CO.
Page 8
of Puerto Rico. See Docket No. 33, at 17.3 As to this burden
argument, however, the Supreme Court explained in Burger
King that “because ‘modern transportation and communications have made it much less burdensome for a party sued to
defend [it]self in a State where [it] engages in economic activity,’ it will usually not be unfair to subject [it] to the burdens of
litigating in another forum for disputes relating to such
activity.” 471 U.S. at 474 (quoting McGee v. Int’l Life Ins. Co., 355
U.S. 220, 223 (1957)). In fact, Burger King held that it did not
offend notions of fair play and substantial justice to force an
individual franchisee to litigate in Florida when his residence
was in Michigan. Id. at 484 (holding that while proceeding in
Florida was likely inconvenient, that inconvenience was not
“so substantial as to achieve constitutional magnitude”).
Nothing in The Lord’s Co.’s filings suggest that the burden on
it is more than is typical in this sort of case, and so I reject its
argument that this Court’s assertion of jurisdiction would
3.
The Lord’s Co. assesses the factors enumerated in Deprenyl, but it only
argues that one of these factors—the burden on the
defendant—strongly supports its argument. See Docket no. 33, at 16–18.
As to the other factors, The Lord’s Co. says that they are neutral or
marginally in its favor. See id.
INGENIADOR v. THE LORD’S CO.
Page 9
offend the Constitution.4 The Lord’s Co.’s motion to dismiss for
lack of personal jurisdiction is therefore denied.
II. Motion to Dismiss for Failure to State a Claim
In the alternative, The Lord’s Co. requests that this case be
dismissed for failure to state a claim. Ingeniador’s claims is for
direct infringement, and its pleadings are sufficient under
Form 18 of the Federal Rules of Civil Procedure, which governs
claims of direct patent infringement. Nonetheless, The Lord’s
Co. asks that I follow Ingeniador, LLC v. Interwoven, 874 F.
4.
Citing 28 U.S.C. § 1400(b), The Lord’s Co. argues that venue is
improper. Section 1400(b) says that in a patent action, venue is
appropriate “in the judicial district where the defendant resides, or
where the defendant has committed acts of infringement and has a
regular and established place of business.” This argument is rejected,
however, because the Federal Circuit has held that a corporation’s
residence, for the purposes of § 1400(b), is controlled by the provisions
of 28 U.S.C. § 1391(c), which states that a defendant corporation “shall
be deemed to reside . . . in any judicial district in which such defendant
is subject to the court’s personal jurisdiction with respect to the civil
action in question.” See Delta Sys., Inc. v. Indak Mfg. Corp., 4 F. App’x
857, 859 (Fed. Cir. 2001) (unpublished); VE Holding Corp. v. Johnson Gas
Appliance Co., 917 F.2d 1574, 1584 (Fed. Cir. 1990). Thus, because I have
found that The Lord’s Co. is amenable to jurisdiction in Puerto Rico,
venue is also proper here. See Trintec Indus., Inc. v. Pedre Promotional
Prods., Inc., 395 F.3d 1275, 1280 (Fed. Cir. 2005) (“Venue in a patent
action against a corporate defendant exists wherever there is personal
jurisdiction.”).
INGENIADOR v. THE LORD’S CO.
Page 10
Supp. 2d 56 (D.P.R. 2012), which held patent complaints must
be assessed under Twombly and Iqbal, not under Rule 18.
I decline The Lord Co.’s invitation. As it notes, its motion to
dismiss is governed by First Circuit—not Federal Circuit—law.
See In re Bill of Lading Transmission & Processing Sys. Patent
Litig., 681 F.3d 1323, 1331 (Fed. Cir. 2012). Interwoven chose not
to accept a pleading pursuant to Form 18 because it understood that where a Form conflicted with Twombly and Iqbal,
those cases controlled. 874 F. Supp. 2d at 66 (holding that
because Twombly and Iqbal “applie[d] to all civil cases,” their
standard governed the plaintiff’s “direct infringement
claims”).5 After Interwoven was decided, however, the First
5.
I have found nine cases from this circuit considering this question, and
Interwoven is alone among them in holding that Form 18's standard
does not govern. See Zond, Inc. v. Fujitsu Semiconductor Ltd., 990 F.
Supp. 2d 50, 54 (D. Mass. 2014) (holding that Form 18 controls);
SCVNGR, Inc. v. eCharge Licensing, LLC, Civ. No. 13-12418, 2014 WL
4804738 (D. Mass. Sept. 25, 2014) (same); Zond, LLC v. Renesas Elecs.
Corp., Civ. No. 13-11625, 2014 WL 4161348 (D. Mass. Aug. 15, 2014)
(same); Zond, LLC v. Toshiba Corp., Civ. No. 13-11581, 2014 WL 4056024
(D. Mass. Aug. 14, 2014) (same); Zond, Inc. v. SK Hynix Inc., Civ. No. 1311591, 2014 WL 346008 (D. Mass. Jan. 31, 2014) (same); Select Retrieval,
LLC v. Bulbs.com Inc., Civ. No. 12-10389, 2012 WL 6045942 (D. Mass.
Dec. 4, 2012) (same); Select Retrieval, LLC v. L.L. Bean, Inc., Civ. No. 120003, 2012 WL 5381503 (D. Me. Oct. 31, 2012) (same); InvestmentSignals,
LLC v. Irrisoft, Inc., Civ. No. 10-600, 2011 WL 3320525 (D.N.H. Aug. 1,
INGENIADOR v. THE LORD’S CO.
Page 11
Circuit expressly held that “the standard announced in
Twombly and Iqbal does not undermine the viability of the
federal forms as long as there are sufficient facts alleged in the
complaint to make the claim plausible.” Garcia-Catalan v. United
States, 734 F.3d 100, 104 (1st Cir. 2013). In reaching this holding,
the First Circuit made reference to Rule 84, “which declares
that ‘[t]he forms in the Appendix suffice.’” Id. (quoting Fed. R.
Civ. P. 84). It further held that “[h]onoring Rule 84 is, in turn,
consistent with the Supreme Court’s instruction that the Civil
Rules may not be amended by ‘judicial interpretation.’” Id.
(quoting Leatherman v. Tarrant Cnty. Narcotics Intelligence &
Coordination Unit, 507 U.S. 163, 168 (1993)).
More to the point, the First Circuit, in holding that the
Forms retain their viability after Twombly and Iqbal, relied on a
case from the Federal Circuit reaching the same conclusion
with respect to Form 18. Id. (citing K-Tech Telecomm., Inc. v.
Time Warner Cable, Inc., 714 F.3d 1277, 1283–84 (Fed. Cir. 2013)).
That case held that Form 18 remains viable and that it, moreover, puts the “potential infringer” on “notice of what activity
2011) (same). That said, some courts have come to the same conclusion
as did Interwoven. See, e.g., Macronix Int’l Co., Ltd. v. Spansion, Inc., 4 F.
Supp. 3d 797, 804 (E.D. Va. 2014).
INGENIADOR v. THE LORD’S CO.
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or device is being accused of infringement.” K-Tech, 714 F.3d at
1284; see also In re Bill of Lading, 681 F.3d at 1333–35 (similar);
McZeal v. Sprint Nextel Corp., 501 F.3d 1354, 1356–57 (Fed. Cir.
2007) (similar). It is plain, then, that the Federal Circuit has
held that pleadings under Form 18 suffice to state a valid claim,
and the First Circuit has endorsed that analysis. Because
Ingeniador’s complaint satisfies Form 18, I must therefore
dismiss The Lord’s Co.’s motion to dismiss for failure to state
a claim.
III.
Conclusion
For all of the reasons stated above, The Lord’s Co.’s motion
to dismiss for lack of personal jurisdiction and for failure to
state a claim, Docket No. 33, is DENIED.
IT IS SO ORDERED.
In San Juan, Puerto Rico, this 24th day of October, 2014.
S/ SILVIA CARREÑO-COLL
UNITED STATES MAGISTRATE JUDGE
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